'Great Gatsby tax' could help level the economic playing field: Washington Post opinion

We have both been lucky enough to attend one of the best public high schools in the country. Lots of people think that once you've made it to Stuyvesant High School in New York, your future will be bright. But even in a school that bases admission on a single exam taken by eighth-graders in New York's five boroughs, class background matters.

For example, when Yo, a freshman, treks to school each morning, he often thinks about how lucky he is to live in Manhattan, closer to school than his classmates who reside in outer Queens. This gives him more time to study or sleep. (Though he's still quite bleary-eyed as he trudges to the subway at 7 a.m. each morning!) He also has a computer at home, so he doesn't need to go to a public library or stay late at school to do his homework. If he falls behind, our family can afford a tutor to help him. Finally, some of his friends may work very hard to get into their top-choice colleges, only to find that their families may not be able to afford it. So while all students are lucky to attend this elite institution, even here the playing field is skewed.

These imbalances become magnified after high school. Not only are the rungs on the economic ladder farther apart here in the United States than they are in, say, Sweden, but rates of mobility — the ability to ascend or descend that ladder — are lower here, too. This is especially troubling, since Americans take pride in the idea that their country promotes greater social mobility than Old World societies do, regardless of the fact that that's no longer so true.

It seems that the United States follows what economists such as Alan Krueger, Miles Corak and others refer to as the "Great Gatsby curve," which correlates higher inequality with lower social mobility. It's not hard to understand why inequality might lead to social stagnation: Super-rich parents can more easily extend privileges to their children. In addition to the advantages mentioned above, the super-wealthy can afford all kinds of extracurricular activities; their donations to universities can help their kids get admitted; and afterward they can (and do) hire their own to work in the family business, whether it's Rolling Stone or Wal-Mart. Magnet schools such as Stuyvesant are not enough to counteract the advantages of extreme wealth.

We need a tax policy that accounts for how economic benefits and disparities are passed down from generation to generation. To do that, we could calculate tax rates based not just on what people earn now — as traditional progressive taxation does — but also on the income their families brought in during their critical childhood years. We shouldn't tax the first-generation college graduate who makes a half-million dollars at the same 39.6 percent marginal tax rate as we do the heir who had his job handed to him.

Let's introduce the Great Gatsby tax rebate for upward mobility: Tax the millionaire who comes from great wealth at 42 percent, and allow the entrepreneur who grew up in a lower-middle-class family to pay 37.2 percent. That would be an extra 2.4 percentage points for the lifelong millionaire and a 2.4 percentage point break for the one who grew up poor. At the same time, let's not punish a child of privilege who gives back to society by, say, becoming a social worker who earns $25,000 a year; we could confine intergenerational adjustments to the top bracket.

In fact, by designing income tax policy in such a way, we would provide incentives for economic mobility. Of course, people don't usually alter their behavior consciously in response to tax rates. But that doesn't mean that they aren't marginally affected by the ability to keep more (or less) of their money. This has been the argument of Republican tax-slashers for decades. If we make upward mobility more enticing for those from modest backgrounds, those folks will strive harder for it.

The U.S. tax code already tries to address the transmission of wealth across generations: It's called the estate tax. However, most individuals who receive estates when their parents pass away are already adults who have made their way in the world. Most social scientific evidence suggests that the finances available early in life matter most to our economic, physical and psychological well-being as adults. Adjusting our income tax policy, on top of the estate tax, would affect families during their prime earning years. The policy would not only ask for something back from individuals who have been fortunate for two generations, it would also level the playing field, slightly, for a third — for grandchildren.

Champions for such a change in tax policy need not only come from the progressive wing of the Democratic caucus, the Elizabeth Warrens and the Bernie Sanderses of Congress. The policy could be kept revenue-neutral so that politicians who would ordinarily scoff at this sort of reform might actually support it. We are thinking of self-made millionaires in Congress such as Rep. Darrell Issa, Calif., or James Renacci, Ohio, both Republicans, along with a barkeep's son who runs the House of Representatives. The politics of generational tax adjustment may be more polarizing along class lines than partisan ones. We could easily see Democratic Sens. Richard Blumenthal, Conn., and John D. Rockefeller, W.Va., taking personal offense, but Rep. David Valadao, Calif., the Republican owner of a highly indebted family farm and rated the poorest member of Congress, supporting our proposal.

Of course, income is not the only, or even the main, advantage that someone can grow up with. Parents' levels of education and household net worth are each better predictors of how their children will fare. And then there are the intangibles: cultural and social capital. This includes being exposed to more vocabulary words, art museums and extracurricular activities — as well as social connections that are helpful in getting internships and other opportunities. (And then there's getting published with your father, a university professor, in this newspaper.) These privileges matter a lot, but they are more difficult to assess. And while they are distinct from monetary advantages, they are probably correlated with them.

If the United States wants to remain a place where the son of a single mother can become the leader of the free world, we'd better do something to bend the Great Gatsby curve toward justice. Magnet schools just aren't enough.

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Yo Jeremijenko-Conley is a freshman at Stuyvesant High School in New York City. Dalton Conley is a university professor at New York University and a Stuyvesant alumnus. They collaborated, along with E Jeremijenko-Conley, on the book "Parentology: Everything You Wanted to Know About the Science of Raising Children but Were Too Exhausted to Ask."